Yglesias says Joe Nocera is wrong about what the House and Senate FinReg bills do about the the credit agencies and he suggests Nocera may be erring on the pessimistic side in his overall analysis.

Unrelated, Senator Charles Schumer works to save free, indie-music, pool-party concerts in Williamsburg, Brooklyn.

Jane Lynch, 49, marries her partner. She stars in the TV show "Glee" and was in "Party Down", "Arrested Development," and "the L Word." She was in the films "Julie and Julia,"  "Role Models," "The Rocker," "Walk Hard," "Smiley Face," "For Your Consideration," "Talladega Nights," "The 40 Year Old Virgin," "A Mighty Wind," and "Best in Show" among others.

Flight to Treasury Bonds wasn't supposed to happen.

It is also sobering that a vast majority of economists and market strategists were forecasting a different chain of events. Treasury yields were universally expected to be rising, not falling, as the United States recovered from a deep recession. The domestic economy is, in fact, growing, and corporate profits have been rising, but the European crisis has overturned many expectations.
...
But Mr. Knapp had thought that the stock market decline would be set off by a tightening of monetary policy by the Federal Reserve, which has operated on an emergency basis since the onset of the financial crisis in the United States. The Fed hasn’t tightened. Instead, to keep the economy stable in the face of Europe’s problems, it has held short-term interest rates near zero. In addition, it reopened emergency swap lines with European central banks last month, to help maintain liquidity there.
...
Mr. Davis said that there is a very "strong correlation" between low Treasury yields and subsequent strong economic growth. And there is a weaker but still significant connection between low yields and high stock returns.

In short, at current prices, it would appear that there is some reason for long-term optimism for stock investors.

(via DeLong)

Geithner urges G-20 nations to spur domestic demand.

The United States wants countries with trade surpluses, like Germany and China, to stimulate domestic demand, fearing that tighter fiscal policy will impede growth and endanger the still-nascent recovery.

"Fiscal consolidation should be 'growth-friendly,'" Mr. Geithner told reporters, saying the "pace and composition of adjustment" should vary across countries.

Krugman responds to the G-20 communiqué:

But don’t we need to worry about government debt? Yes -- but slashing spending while the economy is still deeply depressed is both an extremely costly and quite ineffective way to reduce future debt. Costly, because it depresses the economy further; ineffective, because by depressing the economy, fiscal contraction now reduces tax receipts. A rough estimate right now is that cutting spending by 1 percent of GDP raises the unemployment rate by .75 percent compared with what it would otherwise be, yet reduces future debt by less than 0.5 percent of GDP.

The right thing, overwhelmingly, is to do things that will reduce spending and/or raise revenue after the economy has recovered -- specifically, wait until after the economy is strong enough that monetary policy can offset the contractionary effects of fiscal austerity. But no: the deficit hawks want their cuts while unemployment rates are still at near-record highs and monetary policy is still hard up against the zero bound.

Joe Nocera is not happy with Financial Regulation Reform.

Comedian Aziz Ansari is on "Parks and Recreation" and is hosting the MTV movie awards.

What Mr. Ansari won’t do is exploit his minority status for laughs, or make it the focus of his comedy. You won’t hear him opining about his parents’ background as Tamil Muslims from India, and he said he’s tired of people’s assumptions that he encountered rampant racism growing up in the South.

He grew up in Columbia, South Carolina.

Beijing to raise minimum wage:

Minimum wage in the Chinese capital will be increased to 960 renminbi ($140) a month from 800 renminbi on July 1, the official Xinhua news agency said.

Provinces and cities throughout the country have raised their minimum wage this year as companies have reported growing labor shortages with migrant workers from the interior choosing to seek jobs in small cities closer to their homes.

A strike at a Honda Motor car parts factory that began month was resolved Wednesday after the company offered its workers a 24 percent pay raise, showing how the balance of power in the country’s factories is gradually tipping toward workers.

John Waters on NPR's Fresh Air.

Warren Buffett is dumb

Buffett's holding company Berkshire Hathaway is the largest shareholder in Moody's Investors Service, one of the ratings agencies. He and the head of Moody's testified at a hearing of the Financial Crisis Inquiry Commission.

He did say that Mr. McDaniel and Moody's were no better or worse at predicting the financial fiasco than virtually every other player on Wall Street.

"The entire American public was caught up in the belief that housing prices could not fall dramatically," Mr. Buffett said. Moody’s "made the wrong call," he said, but he counseled humility because "I was wrong on it, too." Before the catastrophe started, he called the housing bubble a "bubble-ette," he said, a term he now regrets: "It was a four-star bubble."
...
Perhaps not surprisingly, the former employees tended to be more critical than those still on the Moody's payroll. Mark Froeba, a onetime senior vice president, told the panel that the culture of Moody's was transformed after the company was spun off from Dun & Bradstreet in 2000.

Quickly, the quasi-academic atmosphere of Moody's vanished, he said. Analysts suddenly felt their first priority was to help the company maintain market share, not get the ratings right.

"Cooperative analysts got good reviews, promotions, higher pay, bigger bonuses, better grants of stock options and restricted stock," Mr. Froeba said in a prepared statement. Uncooperative analysts, he added, were often fired. 

...
The commission’s questioning of Mr. Buffett was not particularly harsh, though panel members were scornful, at times, of Moody's. Mr. Angelides said in his opening statement that 89 percent of the securities given a top triple-A rating by Moody's were later downgraded.

"The miss was huge," he said. "Ninety percent downgrade. Even the dumbest kid gets 10 percent on the exam."

Mr. McDaniel fell back on a defense that has been heard often from top executives at rating agencies: the drop in housing prices was without precedent and therefore all but impossible to predict.

"We believed our ratings were our best opinion at the time we assigned them," he said. "I'm deeply disappointed with the performance of ratings associated with the housing sector"

Mr. Buffett sounded his most sober note when asked by a panel member, Brooksley Born, the former chairwoman of the Commodity Futures Trading Commission, if the derivative market was "still a time bomb ticking away."

"I would say so," he said.

Saving Israel from Itself by Nicholas Kristof

Israel’s hard-line policies are depleting America’s international political capital as well as its own. Gen. David Petraeus noted two months ago that the perception that the United States favors Israel breeds anti-Americanism and bolsters Al Qaeda. The chief of Mossad, Meir Dagan, was quoted in the Israeli press as making the point more succinctly: "Israel is gradually turning from an asset to the United States to a burden."

Peter Boone and Simon Johnson write at The Baseline Scenario:

To be clear, Spain has a better chance of avoiding sovereign and massive bank defaults compared to Greece, which is in intensive care -- with a doubtful prognosis and a permanent resource infusion from the European Central Bank. In this regard the announcements in the last few weeks from Spain were helpful, for example when the government chose resolution authority over religious authority in taking legal control of a troubled savings bank (CajaSur) from the Catholic Church.

Spain’s savings banks, often owned by local authorities, the church, and other civic groups are generally a bastion of moral hazard due to the implicit belief that no political leader would let the relevant creditors fail. The CajaSur takeover did not impose losses on creditors, but it did establish that the managers of failed banks can at least lose their jobs.  

The highly unpopular budget reforms announced by Prime Minister Zapatero further demonstrate some resolve -- and the fact they just passed a legislative hurdle is encouraging. According to optimistic forecasts, Spain’s budget deficit will fall to 5.3% of GDP next year (although the European Commission still has this projected at 9.8%). If Spain can get anywhere near this level, despite 20% unemployment, then financial markets will probably go easy on them. Spain’s high unemployment is partly the result of a more liberalized labor market that made it easier for employers not renew term contracts. This has made Spain one of the worst nations in Europe in terms of employment loss, but it also means jobs could rebound quickly.

GM posts 16.6 percent rise in May U.S. sales

Ford U.S. May sales up 23 percent

Chrysler U.S. May sales up 33 percent

(via Calculated Risk)

(Ebenezer Scrooge encounters Jacob Marley's ghost.)

The American Scrooge Epidemic

Steve Pearlstein writes about Blue Dog centrist Democrats and the deficit:

The Blue Dogs want you to believe that, unlike those other profligate politicians, they really, really care about bringing the federal budget deficit under control, even in the midst of the worst economy in 75 years.

That's why the caucus of fiscally conservative House Democrats insisted last week that their party leaders strip out nearly $30 billion in funding for health-care coverage for the poor and the unemployed from emergency legislation extending jobless benefits. It's not that we're heartless, they explained, it's just that the country can't afford it.

All of which raises the question of why the Blue Dogs couldn't muster the same fiscal discipline when it came to spending $22 billion over the next three years to guarantee that American doctors, who are far and away the best-paid in the world, don't suffer any significant declines in their incomes just because of a little thing like a recession or a government budget crisis.

Given the choice between protecting high-income docs and economically struggling patients, those courageous Blue Dogs sided with the docs.

(via Dean Baker)

Job Bill vs. Deficit by David Leonhardt

The case against the jobs bill starts with the idea that the economy is recovering. Since the recession’s nadir, in January 2009, the job market has improved at the most rapid pace since 1983. On Friday, forecasters expect the Labor Department to report that job growth continued to accelerate in May.

There is always the chance that the economy could slip back again. But the case for optimism seems stronger. Corporate executives are becoming more upbeat, surveys show. Business travel has picked up. Silicon Valley firms are doing more deals. Nissan broke ground last week on a car battery plant in Tennessee, and Chrysler is adding 1,100 jobs at a Jeep plant in Michigan.

...

Of course, even if the bill is not very expensive, it is worth passing only if it will make a difference. And economists say it will.

Last year’s big stimulus program certainly did. The Congressional Budget Office estimates that 1.4 million to 3.4 million people now working would be unemployed were it not for the stimulus. Private economists have made similar estimates.

There are two arguments for more stimulus today. The first is that, however hopeful the economic signs, the risk of a double-dip recession remains. Financial crises often bring bumpy recoveries. The recent troubles in Europe surely won’t help.

The second argument is that the economy has a terribly long way to go before it can be considered healthy. Here is a sobering way to think about the situation: If the next four years were to bring job growth as fast as the job growth during the best four years of the 1990s boom -- which isn’t likely -- the unemployment rate would still be higher in 2014 than when the recession began in late 2007.

Voters may not like deficits, but they really do not like unemployment.

Leonhardt suggests doing both the job bill and more deficit reduction. The political question is how do you do deficit reduction.

The Pain Caucus by Paul Krugman

"A Missing Macroeconomic Playbook?" by Brad DeLong

John Stuart Mill was thus explicitly refuting the older French economist Jean-Baptiste Say. Say had been well-embarked on a career in politics and government in the new French Republic of the early 1790s: special assistant to Gironde Party Secretary of the Treasury Clavier. But then Clavier fell: purged, arrested, imprisoned, and executed by Robespierre's "Mountain" faction. Somehow Say escaped the wreck with not just his life but his liberty and some property as well, and set out to pursue happiness by withdrawing from politics to write treatises on economic theory. In 1821 Say published his Letters to Mr. Malthus, in which he argued that the very idea of a "general glut" was self-contradictory, for the very fact that commodities had been produced meant that there was sufficient demand in aggregate to buy them:

(via Yglesias)

From Wikipedia:

The Mountain (French: La Montagne) refers in the context of the history of the French Revolution to a political group, whose members, called Montagnards, sat on the highest benches in the Assembly. The term, which was first used during the session of the Legislative Assembly, did not come into general use until 1793.

At the opening of the National Convention the Montagnard group comprised men of very diverse shades of opinion, and such cohesion as it subsequently acquired was due rather to the opposition of its leaders to the Girondist leaders than to any fundamental hostility between the two groups. The chief point of distinction was that the Girondists were mainly theorists and thinkers, whereas the Mountain consisted almost entirely of uncompromising men of action.

During their struggle with the Girondists, the Montagnards gained the upper hand in the Jacobin Club, and for a time "Jacobin" and "Montagnard" were synonymous terms. The Mountain was successively under the sway of such men as Marat, Danton, and Robespierre.

"Mountain" by Stereolab


"The Mountain" by the Heartless Bastards

Shorting Reform by Michael Lewis

Eugoogly

Dennis Hopper has died.

Costco Profit Rises 46% as Sales Grow 12%

After the health care reform victory, Obama is out again fund-raising for the Democratic party in anticipation of the coming mid-term elections.* Jackie Calmes writes:

But Democrats grumble that in raising money for them, as for himself, Mr. Obama prohibits donations from lobbyists and political action committees, long the fund-raising base for both parties.

"We make up for it with the large number of new donors that we brought into the process," said Dan Pfeiffer, the White House communications director. "And we have a grass-roots fund-raising capacity that is certainly unprecedented."

The grass roots have been stingier, however, than in 2008, which Democrats attribute to the economic downturn, the delays in winning changes in health care and the fact Mr. Obama is not on the ballot. But passage of the health insurance law, Mr. Pfeiffer said, "excited the grass-roots supporters the way that nothing else has."

In the most recent quarter, unlike the previous one, the Democratic National Committee outraised the Republican National Committee.

Krugman isn't happy.

Some Democrats worry that the new jobs bill is too expensive. With unemployment at 10%, that's crazy.

Republicans have been pounding Democrats on the deficit issue -- a line of attack that infuriates Democrats, who quickly note that former President George W. Bush entered office with a federal surplus and left with a substantial debt that the Obama administration inherited and then added to with its own economic recovery initiatives.

Lengthy, infuriating, thought-provoking op-ed by the a hedge fund manager who has access to the President's economic advisors:

I recently posed this question to one of the president’s senior economic advisers. He answered that the government is different from financial institutions because it can print money, and statistically the United States is not as bad off as some other countries. For an investor, these responses do not inspire confidence.

He went on to say that the government needs to focus on jobs now, because without an economic recovery, the rest does not matter. It’s a valid point, but an insufficient excuse for holding off on addressing the long-term structural deficit. If we are going to spend more now, it is imperative that we lay out a credible plan to avoid falling into a debt trap. Even using the administration’s optimistic 10-year forecast, it is clear that we will have problematic deficits for the next decade, which ends just as our commitments to baby boomers accelerate.

Not if we continue to fix the health care system and raise taxes on people like David Einhorn. At least he says that we should get rid of the official credit rating agencies and admits the financial industry is fighting change:

Congress has a rare opportunity in the current regulatory reform effort to eliminate the rating system. For now, it does not appear interested in taking sufficiently aggressive action. The big banks and bond buyers have told Congress they want to continue the current system.

Dean Baker says:

He tells readers that. "lower official inflation means higher reported real G.D.P., higher reported real income and higher reported productivity." Actually, this is not true insofar as asset prices are the cause of understated inflation. Asset prices do not affect GDP or productivity measures. It is remarkable that Einhorn apparently does not know this.

Einhorn also complains that his assessment of the understatement of inflation:

"doesn’t even take into account inflation we ignore by using a basket of goods that don’t match the real-world cost of living. (For example, health care costs are one-sixth of G.D.P. but only one-sixteenth of the price index, and rising income and payroll taxes do not count as inflation at all.)"

Actually, the government has a wide variety of inflation measures, many of which do include the full weight of health care expenditures. They all show the same thing as the consumer price index: inflation is very low and falling. In short, Mr. Einhorn either has no clue about government data, or he is deliberately trying to mislead readers.

There are signs the economy is improving but it could still easily stumble. But at least there are good signs.
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* Here in Illinois, the White House has sent Education Secretary Artie Duncan and Deputy Chief of Staff Jim Messina to help Giannoulias, the former banker and state treasurer of Greek ancestry. (Update: A day after this post Lynn Sweet reports in the Sun Times that David Plouffe will attend a grass roots fundraiser in Chicago on June 30th.)

Europe's fiscal crisis could hinder US recovery

Facebook unveils simplified approach to privacy after public and media outcry over recent changes

Electronics maker in China promises review after string of suicides

SHENZHEN, China -- Struggling to cope with a rash of suicides at his company’s electronics factories here, the chairman of an electronics maker that supplies Apple, Dell and Hewlett-Packard* said Wednesday that he was doing everything possible to find a solution.

... 

Foxconn, which has about 420,000 employees on two campuses in Shenzhen, is known for its military-style efficiency, the awesome scale of its production operations and for manufacturing popular products like the Apple iPhone. But this year the company has come under intense scrutiny because of a string of suicides by distressed workers between the ages of 18 and 24

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*nice to see Rhys Darby of Flight of the Concords Fame in those HP TV ads.

I just bought three new memoirs: Sarah Silverman's The Bedwetter: Stories of Courage, Redemption, and Pee, Pam Grier's Foxy: My Life in Three Acts and Christopher Hitchens's Hitch-22.